Being public ain’t all it’s cracked up to be

May 12, 2009

IPOs can be very tempting for exchanges, allowing members big payouts and giving the exchanges more financial flexibility to take on new markets.

In the last few years, the majority of the biggest players in the space, from New York Stock Exchange operator NYSE Euronext, and Nasdaq OMX, to Chicago Merc operator CME Group and InterContinentalExchange have gone public.

Several of the few non-public trading venues left, including options exchange CBOE, and electronic venues Liquidnet and Direct Edge, still have IPO plans.

But being public comes at a price — stressed-out employees with options and investors watching plunging stocks. According to the Dow Jones Global Exchanges Index, exchanges’ shares have fallen by nearly half since last May.

At the Reuters Global Exchanges and Trading Summit this week, the CEOs of both CBOE and Liquidnet said the unplanned delays in their IPOs had been a blessing in disguise.

In their own words:
 -Bill Brodsky, CBOE CEO: “The irony is that for the last 12 months, we’ve been better off not being a demutualized or a public exchange because the market has so crushed the multiples of the exchanges.”
– Seth Merrin, Liquidnet CEO: Thank God we didn’t do the IPO in the fall- who needs the distraction of watching your stock drop?”
(DirectEdge CEO Bill O’Brien said no IPO for at least another year, by which time — god willing — the IPO market should be closer to back to normal.)

One holdout has said thanks but no thanks for an IPO for the forseeable future:
– Joe Ratterman, BATS Trading CEO: Investors are quite happy with our company, and somewhere down the road we may monetize this but this is up  toour ownership.”
Maybe he doesn’t need the agita of seeing his stock go up and down.


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